US judge readies response to Argentina's threats

<p>Argentine President Cristina Fernandez speaks during the ceremony for the160th anniversary of the Buenos Aires Stock Exchange in Buenos Aires, Argentina, Wednesday, Aug. 20, 2014. Argentina's government is proposing to change the way it pays holders of the country's debt, shifting it out of the U.S. financial and legal systems as a way to end the default triggered by a legal battle with U.S. investors. (AP Photo/Victor R. Caivano)</p>

NEW YORK (AP) ? A U.S. judge frustrated by debt-ridden Argentina's refusal to comply with his orders is being urged to take stronger action against the South American nation as it maneuvers to get its finances beyond his control.

Judge Thomas Griesa scheduled a hearing in Manhattan for Thursday afternoon after lawyers for U.S. hedge funds asked him to consider holding Argentina in contempt of court and issuing sanctions.

At an Aug. 8 hearing, Griesa had threatened to do just that, saying the nation's leaders were making "false and misleading" statements as they ignored obligations to pay the hedge funds.

Since then, Argentina's public statements have grown more defiant. President Cristina Fernandez announced a plan this week to make interest payments to some bondholders through its own central bank rather than U.S. banks that are subject to Griesa's orders. And posters depicting the judge as the face of a vulture have appeared in Argentina.

The U.S. funds led by New York billionaire Paul Singer's NML Capital Ltd. bought the bonds on the cheap after Argentina's 2001 default on more than $100 billion but are now demanding payment in full. Argentina's leaders have labeled the funds "vultures" because they refused to participate in swaps in 2005 and 2010 in which over 90 percent of Argentina's bondholders agreed to accept lesser-valued bonds.

Jonathan Blackman, a lawyer for Argentina, has repeatedly told the judge that the country is left with few options because any deal it reaches with U.S. bondholders who are owed about $1.5 billion would obligate it to pay over $20 billion to other bondholders.

In a letter to the judge Wednesday, attorney Robert A. Cohen on behalf of the U.S. bondholders said Argentina's new proposal would offer his clients the same "stingy terms" that the hedge funds had declined twice before and force them to submit to Argentina's "puppet bank" or "Argentina's patsies" for payments.